In the face of stock market volatility, falling bond prices, and collapsing oil prices in April 2025, gold has emerged as a central player in the investment world. As investors flocked to gold in response to trade tensions and Donald Trump’s tariffs, its price surged to new all-time highs, reaching around $3250 (£2460) per troy ounce. Gold’s steady climb, which started below $1900 in September 2023, shows no signs of stopping. But what’s behind this rise, and is investing in gold still a good move for the future?
What Drives Gold Prices?
The price of gold is influenced by multiple factors, making it a complex asset to evaluate. As both a commodity and a store of value, gold faces competing forces in terms of supply and demand, macroeconomic events, and production limitations. Here’s a closer look at the factors driving gold’s price:
Macroeconomic Events
Major global events, such as the trade war initiated by Donald Trump’s tariffs, significantly impact gold. As Lindsay James, investment strategist at Quilter, noted, gold can experience volatility in response to such events. However, with inflation expected to rise in the U.S. and government debt on an unsustainable trajectory, gold’s appeal as a safe haven remains strong.
Stockpiling by Central Banks
Recently, central banks have increased their gold holdings to diversify away from the U.S. dollar in light of geopolitical tensions and tariff disputes. This buying trend has supported gold’s price rally and is expected to continue in the near term.
Pros and Cons of Investing in Gold
Gold is often seen as a hedge against inflation and economic instability. Unlike cash, it doesn’t lose value due to inflation, nor is it influenced by fluctuating interest rates. These characteristics make gold an attractive safe-haven asset.
Pros:
- Store of Value: Gold retains its value over time and doesn’t depreciate like currency.
- Protection Against Inflation: It acts as a hedge when inflation rises.
- Liquidity: Gold, especially through ETFs, is highly liquid, meaning it’s easy to buy and sell.
Cons:
- No Income: Unlike stocks, gold doesn’t pay dividends or interest.
- Storage Costs: Physical gold requires insurance and storage, leading many investors to opt for gold ETFs instead.
- Price Fluctuations: There’s no guarantee that gold’s price will continue to rise. For example, it took 14 years for the price of gold to see meaningful growth after 1990.
Gold ETFs: A Popular Investment Vehicle
Many investors choose gold ETFs as a way to gain exposure to gold without the hassle of physical storage. ETFs mirror the value of gold and offer an easy entry point into the precious metal market. For UK investors, these ETFs are tax-free if held in an ISA, making them a particularly attractive option.
While gold ETFs offer ease and liquidity, they also come with missed opportunities, as investors may pass on other potentially profitable investments in the process.
Should You Invest in Gold Now?
With gold prices at an all-time high, the question arises: is it still a good investment? As with any commodity, the future price of gold is uncertain. However, experts believe that even if a short-term sell-off occurs, the long-term outlook for gold remains positive.
Robert Minter, Director of ETF Investment Strategy at Aberdeen, suggests that gold could reach $3500 per ounce by the end of 2025. Despite the recent surge in prices, many gold investors, particularly in ETFs, still hold a significant amount of gold compared to pre-COVID levels, which suggests that demand for the precious metal could continue to grow.
Conclusion
While gold’s price has surged recently, its role as a safe-haven asset and store of value during uncertain times makes it a smart long-term investment. For investors looking to diversify their portfolios and hedge against macroeconomic risks, gold remains a strong contender. As the global economic landscape continues to evolve, gold’s value could continue to rise, especially for those with a long-term investment horizon.
